Eurozone Economics Has Turned Into A Giant Game Show

The first estimates for first quarter GDP growth were released
across the eurozone this morning, and the numbers leave a lot to
be desired.

In France, the economy
contracted 0.2%, matching the pace of contraction in the fourth
quarter of 2012 but missing economists' estimates for a smaller,
0.1% contraction.

In Germany, GDP rose 0.1%, but
the data fell short of expectations for a 0.3% advance, and the
contraction in the fourth quarter was revised to 0.7% from
0.6%.

In Italy, the economy shrank
0.5%, indicating a slowing pace of contraction after falling 0.9%
in the fourth quarter, but missing estimates for a smaller, 0.4%
contraction, and extending Italy's recession to seven straight
quarters – the longest on record.

Nonetheless, markets across the
eurozone are advancing today, undeterred by the bad data.

"That we no longer need
to deal with the consequences of bad data now rooted in policy
attempts to reduce public spending means that the seemingly
worsening economic picture can be treated with kid gloves," says
Andrew Wilkinson, Chief Economic Strategist at Miller
Tabak.

Wilkinson compares the releases
to a game show:

Indeed one can envisage the
slew of economic data being presented by a sympathetic game show
host, sugar-coating the bad news first-quarter growth readings
that largely missed estimates. The host knows he can keep up hope
amongst the audience by softening the blow as he says that the
“EU team” as a whole didn’t do as well as hoped – “but that’s
alright, because you did better than you did in the last round.
So keep your spirits up, we’re getting there.” The EU-wide
economy contracted by 0.2% in the first-quarter (two times as
bad) but that was a lesser pace of contraction than in the
fourth-quarter when output across the zone fell by 0.6%.

You can see the host shuffle
his prompt cards, keeping his microphone close to his mouth as he
moves on to the individual performances. “Italy – you shrank by
0.5% when we thought you’d do just a little better,” he says
offering a stern look aimed at embarrassing the contestant. “But
still that’s much better than in the last round. You slipped by
0.9% then, but we’ve got a long way to go.” And quickly flipping
to the next card he excitedly jumps to the French contestant and
claims that the Parisian contender fared just as well to start
the year as he finished the last. Still, a revision up for Q4 was
offset by a weaker first-quarter. GDP growth contracted by 0.2%,
prompting a “zut alors!” from the host.

But the highlight of the show
comes as the host turns to an exhausted-looking German
contestant. “You did it! You’re back in the black and as team
leader you made everyone else look good!” The German economy grew
by just 0.1% following a slightly deeper pace contraction than
was originally reported in the fourth when the economy sank by
0.7%. The audience, however, had been looking for a better
performance of 0.3% growth, but that didn’t happen as the other
team members prevented him from running as fast as he really
could have done.

And so all said and done, the
audience is taking the growth reports in its stride. The show
wasn’t great, but the host delivered the news well and provided
us with encouragement for the future. How could things get any
worse?

It's nothing new, but the
saying that "bad news is good news" seems to be holding up pretty
well today in the market.